Suez Cement Co. · EGX:SUCE
Suez Cement — Q1 2014 Earnings Presentation
46 slides from Suez Cement's earnings presentation, Mar 31, 2014
Slide 1: Corporate Briefing
Corporate Briefing Suez www.suezcement.com.eg Title 1 Cairo,Cement March 31st 2014
Slide 2: Contents
Contents Group Overview Market Overview Investment Highlights Financial Highlights Suez Cement Corporate Briefing 2
Slide 3: Group Overview
Group Overview Suez Cement Corporate Briefing 3
Slide 4: Vision and Mission
Group Overview Vision and Mission Building our vision To be a world class local business building a better and sustainable future for all our stakeholders Building our mission To create value in the building materials sector through the Innovative and sustainable use of natural resources for t
Slide 5: SCgC Group at a glance and revenue breakdown
Group Overview Revenue Breakdown Others 3 % SCGC Group at a glance Ready Mix 7 % Egypt’s cement market leader Part of the world’s fifth largest global cement producer Total production capacity of more Cement 90 % than12M t/y cement MS 5 cement plants, 2 terminals, and 20 concrete batching
Slide 6: Group Overview - Stock Market: Ownership Structure
Group Overview - Stock Market Nam e No. of Shares % SCC Ownership Structure Private Funds 2,594,087 1.43% Private Insurance Companies , Banks and 10,463,889 5.76% Name No. of Shares % institutions Misr Capital Investments, SAE 5,502,511 3.03% Individuals 3,772,950 2.07% Nasser Social Bank, SAE 2,3
Slide 7: Key milestones
Group Overview Key milestones A successful expansion path...paused since Arab spring 2007 JV between SCC and UNICALCE SCC acquired 51% of Hilal Cement - Kuwait 2006 SCC acquired Ready Mix Beton & DECOM 2005 Suez Cement (SCC) acquired 99% of Helwan Cement Company 2001 Italcementi Group entered
Slide 8: SCgC Industrial network
Group Overview SCgC Industrial network Suez plant 5 production facilities located in Torah plant Kattameya Helwan, Tourah, Kattameya, Suez Helwan plant plant and El Minya. Menya plant Total production capacity of 12 million metric tons of cement. Approximately 15 percent market share of grey
Slide 9: Country rankings and market shares
Group Overview Country rankings and market shares BELGIUM BULGARIA 3rd - 15% 30% - 1st CANADA KAZAKHSTAN 5th - 4% 14% - 4th U.S.A. 7th - 5% 2° MOROCCO THAILAND 2nd - 24% 15% - 4th SPAIN 2012 Revenues by Geography (after eliminations) INDIA 7th - 6% 7th n.m. Other Emerging Markets, Trading & Others 1
Slide 10: SCgC Group structure
Group Overview SCgC Group structure Arab Italcementi Group Others Investors 55.08% 25.48% 19.44% Suez Cement Company Tourah Helwan Cement Cement Hilal Cement RMCA - Alalameya Suez Lime Suez Bags Tecno Development (TPCC) (HCC) 51% 52% 49.66% Co. (SBC) Gravel for Industries 66.12% 99.54% 56.31% 45%
Slide 11: Companies listed in the Egyptian Stock Market
Group Overview - Stock Market 3 Companies are listed in the Egyptian Stock Market Suez Cement Company (181,856,507 shares) Tourah Portland Cement Company Private (71,524,200 shares) Sector Free Float Entities & 7.41 % Free Float 11.49% Public Sector Entities 13.99% Itacementi Public/Priva Group te
Slide 12: Group Overview - Stock Market: P/E multiple
Group Overview - Stock Market Strong decline in Price/Earning multiple which started to bounce back Suez Cement ( In M EGP ) Market Cap P/ER 18000 25 16000 21.1 21 EGX Code SUCE 14000 20 No. of Shares 181,856,507 17.1 12000 15.5 15 Market Value 10000 10.7 Price Earning 8000 7.8 8.5 10 6000 6.5 7.2
Slide 13: Market Overview
Market Overview Suez Cement Corporate Briefing 13
Slide 14: Egypt Macroeconomic Outlook
Market Overview Egypt Macroeconomic Outlook 2012e 2013f 2014f 2015f 2016f 2017f actual actual actual actual actual actual Population growtth 80.7 82.2 83.4 84.7 86.0 87.3 Gross Domestic Product (% yoy)* 6.0 4.0 4.5 4.5 4.5 4.5 Gross Fixed Capital Formation (% yoy) 32.8 -3.7 10.9 16.1 16.6 17.3 Inf
Slide 15: Market volumes and market share
Market Overview Egypt Macroeconomic Outlook 60 50 -2.1% 49.5 50.2 50.1 + 2.3% 40 48.7 Market 48 30 Volumes* 38.5 20 34.5 12.9 13.2 M tons 28.5 30.1 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 2014 Q1 Q1 30% 31% 31% 28% 24% 22% 20% 18% 15% 15% 12 10 11.7 SCGC MS % 10.9 11.1 9.8 8 10.6 6
Slide 16: Cement final destination by segment
Market Overview The residential segment consumes more than 65% of the total cement consumption Residential Cement Final Destination Although the tough situation this segment still have Good Infrastructuer perspectives in the short and 25% Residential, 65% medium term projects. Non-residentia
Slide 17: Cement consumption by region
Market Overview More than 60% of total domestic cement consumption is concentrated in Greater Cairo & Delta Cement dispatch/ region Market % SCGC of Total MS% Greater Cairo 25% 52% Delta 35% 26% Upper Egypt 16% 3% Others 21% 9% Population 2013*: 83.6 million Growth rate (2011-2013)*: 1.9%
Slide 18: Evolution of OPC Bag - Bulk Ratio
Market Overview Evolution of OPC Bag – Bulk Ratio in the Egyptian Market Bagged to Bulk Ratio Bags Bulk 9% 9% 11% 9% 91% 91% 91% 89% 9% 11% 91% 89% 2010 2011 2012 2013 2013 Q1 2014 Q1 Source: internal market intelligence Suez Cement Corporate Briefing 18
Slide 19: Investment Highlights
Investment Highlights Suez Cement Corporate Briefing 19
Slide 20: Part of a global player
Investment Highlights Being part of a global player, SCgC has an immediate access to worldwide best practices World class Strong corporate Global industrial and management team governance distribution network Technical Know-how, Highest operating, World class Health, R&D, and industry control & ri
Slide 21: Attractive Business Model
Investment Highlights Attractive Business Model Suez for Import and Export Suez for Transportation and Trade Co. Importation Distribution Retailing Cement Quarrying Bagging Production Suez Bags Co. Helwan Bags Co. Bulk Concrete RMC Admixtures RMB Co. A Fully Vertically Integrated Player Suez Cemen
Slide 22: Operational Efficiencies in the pipeline
Investment Highlights Operational Efficiencies in the pipeline Installing state-of-the art kiln and mill production lines replacing the less efficient ones Starting to use Coal instead of Gas. Decreasing the clinker ratio in cement production through the use of alternative raw materials can
Slide 23: Q1 2014 GOP Variance
Q1 2014 GOP Variance Q1 Ac 14 Vs. PY: negative performance effect due to clinker purchased and energy price increase amounting to respectively (-35 M & - 65 M) is partially offset by the volume & price variance (+ 15 M & + 87 M respectively), Positive price effect is offset by the energy increase
Slide 24: Evolution of SCGC OPC Bags Ex-works price
Evolution of SCGC OPC Bags Ex-works price (EGP/t) 4th Mar 13 1st Jun 13 Mar14 Sales Tax 5% Sales Tax 5% + 1% +49EGP/ton 615EGP/ton commercial tax 663EGP/ton 603.5EGP/ton 9th Feb 13 Sales Tax 5% 18 Mar10 548.6EGP/ton +10EGP/ton 465EGP/ton 1st Jul10 22nd Feb14 Jan 10 Sales Tax 5% 614EGP/ton 496EGP/ton
Slide 25: EGYPT - Domestic cement consumption
EGYPT – Domestic cement consumption A rather stable series of boom & bust periods of ca. 5years 1980-1986 X2 1986-1994 stable at 15 Mt 1994-1999 X1.9 1999-2004 stable at 28 Mt 2004-2009 X1.7 2009-2013 stable at 48 Mt 2013-2018 X1.5 f : to 72Mt ? Italcementi Italcementi Suez Cement -Group Italcementi
Slide 26: Suez Cement Mid Term Plan
Suez Cement Mid Term Plan Improving Market conditions Market recovery from 48 to 60 Million Tons (25%) Limited capacity addition anticipated (5 to 6%) => Capacity utilization should increase from mid 70s to mid 90s Implementing fuel flexibility strategy Coal and Petcoke to release gas & fu
Slide 27: Suez Cement Mid Term Plan
Suez Cement Mid Term Plan Efficiency gains Energy consumption optimization (wet kilns decommissioned, waste heat recovery…) Headcount progressive alignment to industry benchmark (850 employees to retire through 2020) Sustainability Energy strategy to mitigate CO2 emissions from coal usage.
Slide 28: Organic and inorganic growth
Investment Highlights SCC considers both organic and inorganic growth to increase the production capacity Growth T Organic Growth Inorganic Growth o b e New Licenses Replacement of the D inefficient lines Possible o Acquisitions n Egypt and MENA e Aggregates Helwan Cement D De-bottleneckings Co. o
Slide 29: Differentiation strategy and cement types
Investment Highlights As a Business-Level strategy, SCgC implements a differentiation strategy in its marketing approach that provides value to customers and is worth a premium price 13 Different types of cements Original Products Premium Products Special Products Ordinary Portland Cement Prem
Slide 30: Sustainable Development
Investment Highlights - Sustainable Development Vision SCgC is aware of the importance of its social role and promotes a socially responsible behavior among all of its employees. The Company believes that Sustainable Development, as a combination of economic prosperity, environmental protectio
Slide 31: Commitment to Environment Protection
Investment Highlights - Sustainable Development Commitment to Environment Protection We are committed to: Constantly monitor each of our sites to reduce and prevent any possible effect on the environment. Optimize the use of non-renewable resources in our production processes Enforce the b
Slide 32: Quality and environmental key achievements
Investment Highlights - Sustainable Development Our quality and environmental key achievements • Establishing new Coal mills in Kattameya and Suez. • Utilizing agricultural wastes, sewage sludge's • Recycling of bypass dust • concealment of historical bypass dust Environmental • Pollution abatemen
Slide 33: Social initiatives
Investment Highlights - Sustainable Development Social initiatives Our efforts have been focused on: Safety in the workplace and industrial hygiene; Direct and indirect local employment according to the requirements of its activity; Responsible restructuring; Assessment of employee satis
Slide 34: Social Initiatives for 2014 - Q1
Social Initiatives for 2014 – Q1 • Ongoing partnership with Don Bosco Technical Institute supporting much-needed upgrades to the school's infrastructure and facilities and development of new programs as well as an increase in the number of students attending the institute. It helps also students to
Slide 35: Commitment to Safety
Investment Highlights - Sustainable Development Commitment to Safety Adopting the “Zero Accident” brings together all the necessary programmers required to establish a consistent Safety management system. Evolution of Frequency of Accidents1 (2009 – 2013) 2009 2010 2011 2012 2013 Q1 2013 Q1 2014
Slide 36: Corporate Governance
Investment Highlights - Sustainable Development Corporate Governance Committed to efficiency, transparency and appropriate management Standing for business ethics and creation of value A well defined decision making structure Adopting consistent system of policies and procedures which comp
Slide 37: Financial Highlights
Financial Highlights Suez Cement Corporate Briefing 37
Slide 38: SCgC Cost Breakdown
Financial Highlights March 2014 SCgC Cost Breakdown An increasingly energy intensive industry… Energy represents 61 % of the production cost Energy represents 67 % of the production cost December 2013 SCgC Cost Breakdown Suez Cement Corporate Briefing 38
Slide 39: Energy price increases
Financial Highlights Fuel prices increased by more than 50% since Feb 2013 Electricity EGP/MWH x 3 since 2004 268 329 400 245 300 134 161.3 113.4 119.1 125 200 100 0 Before 30- 1-Dec-04 1-Dec-05 1-Oct-06 1-Sep-07 1-Jul-08 1-Jul-10 1-Jan-12 Sep 04 Fuel Oil EGP/t x 6 since 2004 1700 1624 1400 1000 1
Slide 40: YTD March 2014 key results (Consolidated)
YTD March 2014 key results (Consolidated) 2014 Q1 EBITDA (316 MEGP vs. 337 MEGP in PY) decreased by ( 21 MEGP or -6.1%) as price improvement did not cover for the costs increases driven by energy ( higher prices and shortage causing clinker imports). Suez Cement 40
Slide 41: EBITDA Evolution (Consolidated)
EBITDA Evolution (Consolidated) While 6.2% lower than in Q1 2013, first quarter EBITDA is confirming the trend inversion in profitability. EGPm Quarterly EBITDA 2012-2014 400 350 300 337 300 315 316 300 263 250 268 269 200 241 242 150 100 139 50 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2
Slide 42: Financial Highlights
Financial Highlights March March MEGP 2010 2011 2012 2013 2013 2014 Revenues 6,152 4,820 4,597 5,049 1,273 1,452 EBITDA - recurring 2,120 1,199 1,051 1,061 337 316 % on revenues 34.4% 24.9% 22.9% 21.0% 26.5% 21.8% EBIT 1,705 837 702 681 248 212 % on revenues 27.7% 17.4% 15.3% 13.5% 19.5% 14.6% Net P
Slide 43: Strong equity structure with growing cash
Financial Highlights Strong equity structure with growing accumulation of cash MEGP 2010 Dec 2011 Dec 2012 2013 March 2013 March 2014 Total L-T Assets 6742 6703 6654 6,842 6627 7064 Inventory 952 998 804 844 846 864 Account Receivables 243 247 268 204 229 202 Cash and Cash Equivalents 1758 1448 16
Slide 44: Key Historical Financials
Financial Highlights Key Historical Financials : current environment heavily impacting results but cash flow generation has been somehow resilient. Revenue (EGPm) CAGR 06-13: 4% Rec. EBITDA (EGPm) CAGR 06-13: -3% 6,380 2,155 2,120 5,542 6,152 5,049 1,757 1,863 4,196 4,820 4,597 1,443 1,199 1,051 1,0
Slide 45: Dividend pay out since 2004
Financial Highlights More than EGP 4 BN dividend pay out since 2004 Dividend distributed by SCC (EGPm) Dividend per Share (EGP/Share) 4.26 774 Annual Dividends. 3.9 182 Interim Dividends. 709 2.65 592 482 2.0 2.0 2.0 4.4 1.7 182 1.65 364 364 363 282 309 182 118 300 1.4 182 118 96 2004 2005 200
Slide 46: Main Historical Acquisitions and Capex
Financial Highlights Main Historical Acquisitions and Capex Year Company Share Value 2005 Helwan Cement Co. 98.7% EGP 3.4bln 10/2006 RMB + RMBE 52% EGP 81M 8/2007 Hilal Cement (Kuwait) 51% EGP 262M CAPEX Figures are in MEGP 408 407 324 233 264 230 252 101 31 2007 2008 2009 2010 2011 2012 2013 Q1 2